Monthly Archives: March 2015

March 27, 2015 · 8:00 am

Earned Value Management and cash preservation

A few weeks ago I attended a 2-day training course titled “Finance for non financiers”. I found it too basic. However, I wanted to comment on one exercise we were proposed almost at the end of the course.

We had just reviewed some notions of Earned Value Management with its main concepts: Planned Value (or Budgeted Cost of Work Scheduled (BCWS)), Actual Cost (or Actual Cost of Work Performed (ACWP)), Earned Value (or Budgeted Cost of Work Performed (BCWP)), Schedule Performance Index (SPI=Earned Value / Planned Value), Cost Performance Index (CPI=Earned Value / Actual Cost), etc., when the teacher posed the following question:

From a cash management (preservation) point of view rate the following sets of EVM indicators from best to worst:

1) SPI=1.2, CPI=1.2,

2) SPI=1.2, CPI=0.8,

3) SPI=0.8, CPI=1.2,

4) SPI=0.8, CPI=0.8.

Any EVM practitioner or person with some notions of EVM will know that in EVM SPI and CPI above 1 means good, and below 1 means bad. Therefore, from the previous exercise we would be able to immediately say that the best case is 1) (both indicators above 1) and the worst case is 4) (both indicators below one). The tricky situation would be how to value cases 2) and 3) where one of the indices is positive and the other negative.

I remember that in the class I quickly thought “if we want to preserve cash, a positive SPI means we advance faster and if it is coupled with a negative CPI that means we are burning cash at a higher than planned rate, therefore it is better the case 3) where we advance at a slower rate but always below planned budget”.

I was surpised when other colleagues started diverting with thoughts like “if you take the case 3) and are behind schedule you would not receive cash inflows so it would be worse” (?). However, the question from the exercise did not give any hint of whether cash inflows are linked to planned value, earned value or you just start with a pile of cash to be used. It just asked about cash preservation.

In my first year of university studies in aerospace engineering I very well learnt the lesson of not guiding oneself responses by the first intuition that you may have but to apply the knowledge acquired to the question at hand. In relation to this case, it would be as easy as to depict the typical EVM curves for the 4 cases and see which one is burning cash at a higher rate.

In each of the 4 graphics below you will see a black curve which represents the Planned Value, a green curve which represents the Earned Value and a red curve which represents the Actual Cost. In absence of information of whether the cost in the exercise is equal to cash outflows, we can assume that it is. Therefore, the best case for preserving cash (other things being equal) would be that with the lower Actual Cost curve (red curve). See the different curves below:

EVM case 1: SPI=1.2, CPI=1.2

EVM case 1: SPI=1.2, CPI=1.2

EVM case 2: SPI=1.2, CPI=0.8

EVM case 2: SPI=1.2, CPI=0.8

EVM case 3: SPI=0.8, CPI=1.2

EVM case 3: SPI=0.8, CPI=1.2

EVM case 4: SPI=0.8, CPI=0.8

EVM case 4: SPI=0.8, CPI=0.8

The first interesting point is that both cases 1 and 4 are burning cash at the same rate, however case 1 is ahead of schedule and case 4 is behind schedule. Therefore, case 1 is preferable, because in the end with case 4 we would arrive at the 12th month having consumed all the planned resources but not having completed the project.

Between the tricky cases, 2 and 3, we can immediately see that case 2 has burned more than twice the cash than case 3 at any given point! We can therefore infer that case 2 is indeed the worst case among the two.

Even if you think along the lines of some of my colleagues, i.e. assuming that cash inflows are linked to earned value (1), you will see that in case 2 the actual costs are always above earned value, whereas in case 3 the actual costs are below! So even following their way of thinking, had they done the math, they would have arrived to the same conclusion!

See in the graphic below how the case 2 burns much more cash than the case 3.

However, if the question had asked about what case is preferred from a schedule point of view the answer would have been different: as in the case 2 the project would have been completed by the 9th month (no matter the cost), whereas in the case 3 by the end of the year only a 80% of the project would have been completed (despite of the savings).

EVM cases 2 and 3.

EVM cases 2 and 3.

Finally, see below a table the detailed calculations for all 4 examples through the 8th month.

EVM calculations for the 4 cases.

EVM calculations for the 4 cases.

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(1) Even in the absence of such information.

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March 25, 2015 · 8:00 am

Goals Gone Wild

In these first months of the year many teams in many firms have gone or are going through annual interviews and goals setting for the year 2015.

Last week I read an interesting Schumpeter column in The Economist, “The quantified serf: Management by goal-setting is making a comeback, its flaws supposedly fixed”.

The article mainly covered two issues: one was the newest trend in goal-setting, “quantified work”, as promoted by BetterWorks, whereby employees collaborate in setting objectives for peers. This apparently improves performance and transparency. The article cautions, however, that rewards should not be linked to these goals and that an attainment of 60-70% of goals set in this way should be viewed as normal rather than failure.

The second issue covered by the article was side-effects of goal-setting. The article introduced the paper “Goals Gone Wild: The Systematic Side Effects of Over-Prescribing Goal Setting” [PDF, 500KB] by Lisa D. Ordóñez, Maurice E. Schweitzer, Adam D. Galinsky and Max H. Bazerman. In this post I wanted to comment on this paper.

Published in 2009, the paper makes a review of literature on goal-setting and even if admitting that studies have demonstrated specific and challenging goals can improve performance, it concludes that:

“For decades, scholars have prescribed goal setting as an all-purpose remedy for employee motivation. Rather than dispensing goal setting as a benign, over-the-counter treatment for students of management, experts need to conceptualize goal setting as a prescription strength medication that requires careful dosing, consideration of harmful side effects, and close supervision. […]”

Before reaching to that conclusion the paper examines several aspects of goals and why they may produce harmful side effects; to name a few:

  • When goals are too specific… people overlook other important features of a task. As an example the authors provide the case of the Ford Pinto, about which I wrote a post in the blog long ago.
  • When there are too many goals… individuals are prone to concentrate on only one goal.
  • When the time horizon is inappropriate… may harm the organization in the long run. Think of quarterly reports and companies trying to beat analysts’ estimates or their own guidance. That is why Coca Cola ceased to provide quarterly guidance back in 2002.
  • When goals are too challenging… they may shift risk attitudes, promote unethical behaviour. An example given describes how Sears’ automotive unit set a target of fee to be charged to customers. This triggered that employees started charging for unnecessary repairs to customers to meet the goals!
  • When goals are complex, specific, challenging… they may inhibit learning.
  • Goals may create a culture of competition instead of cooperation.
  • Goal setting increases extrinsic motivation… and thus can harm intrinsic motivation.
  • …

Linked to the message given in the conclusion (“experts need to conceptualize goal setting as a prescription strength medication that requires careful dosing, consideration of harmful side effects, and close supervision”), the authors also propose the following warning signal and a check list to be used when setting goals.

Goals Gone Wild Warning Signal.

Goals Gone Wild warning signal.

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March 23, 2015 · 8:00 am

Open letter to Europcar

In the year through November 2014 I had rented cars 24 times with Europcar. I don’t have the exact figure for the last 4 years but it must have exceeded ~60 times.

A few days ago I received the email below from Europcar Loyalty Programs announcing me that I had been granted the Privilege Elite VIP card (the highest in the scale, see below).

Europcar's email

Europcar’s email with the news of being granted the Privilege Elite VIP card.

See below the different cards in the Loyalty Program:

Europcar's fidelity program cards.

Europcar’s fidelity program cards.

See my response to that offer:

My response to Europcar's email.

My response to Europcar’s email.

I am pretty sure this letter will not trigger any change in Europcar’s commercial policy. But I wanted to show them how much I value their commercial policy.

Side note: since November I moved houses. I have not cared about notifying Europcar about the change. That card will be lost somewhere. I don’t care. That is my fidelity and loyalty to Europcar.

On the other hand, I am also fairly sure that at some point Sixt will charge me a similar stupid concept, I will then move to another company, no problem.

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March 21, 2015 · 12:05 am

KC-46 EMD contract (update March 2015)

About two years ago I wrote a post, KC-46 EMD contract 101, in which I reviewed the nature, implications and status of the Fixed Price plus Incentive Firm (FPIF) that the US Air Force had signed with Boeing for the tanker K-46 Engineering Manufacturing and Development (EMD) contract.

I have been wanting to write an update of that post with how the situation has evolved for some months. The recent article in Bloomberg, “Boeing KC-46 Tanker Suppliers Behind on Deliveries, GAO Finds“, has finally triggered this review.

A recap of the main points from the Bloomberg article:

[…] The boom for the first KC-46 has been “delayed by eight months due to design changes and late parts deliveries,” […]

The delays have resulted in a slip of at least three months in the initial flight of the first fully equipped development aircraft. […]

[…] GAO said “another supplier has experienced significant delays in manufacturing” aerial refueling wing pods […]

[…] the Air Force projected in a revised estimate this year that Boeing will have to absorb $1.5 billion for exceeding a $4.8 billion ceiling to develop the first four planes.

Bloomberg cites GAO as a source. GAO stands for US Government Accountability Office. Every year, in March, the GAO releases its “Assessments of Selected Weapon Programs” where it reviews the Department of Defense (DoD) main programs. Find here [PDF, 10.4MB] the 2015 report released on March 12. It contains just 2 pages about the “KC-46 Tanker Modernization Program (KC-46A)”. What does it say? Main take aways:

[…] After the critical design review, the program had wiring design changes that led to several delays, including at least a three month delay to KC-46 first flight. The program does not plan to demonstrate a full system-level prototype until April 2015, 21 months after its critical design review. […] 

[…] key suppliers have continued to experience difficulties with the design and manufacture of aerial refueling systems, such as refueling booms and wing aerial refueling pods. The boom that was to be installed on the first KC-46 has been delayed by eight months due to design changes and late parts deliveries. Another supplier has experienced significant delays in manufacturing wing aerial refueling pods for qualification testing and development aircraft due, in part, to challenges with parts delays and engineering design changes. As a result of these delays, first flight of an aircraft that integrates military sub-systems has slipped at least three months to April 2015, 21 months after critical design review. […]

[…] Boeing is encountering more than twice the number of software problems than originally estimated that prevent or adversely affect the accomplishment of an essential operational or test capability.

[…] the program office noted that it has mitigated financial risk with the competitive fixed-price incentive development contract with firm-fixed and not-to-exceed pricing for the production of the aircraft. More than 57 percent of the development work has been completed. Boeing has met or exceeded all contractual requirements. […]

The program performance review that the GAO makes is seen from the Air Force point of view, which, as indicated above, since the contract is a FPIF, the USAF feels protected and thus it does not show any sign of the 1.5bn$ over cost that Bloomberg mentions that Boeing will have to bear:

Program Performance (fiscal year 2015 dollars in millions)

Bloomberg quotes a 1.5bn$ estimated over cost based on Air Force data.

The GAO published in March 2012 [PDF, 1.1MB], February 2013 [PDF, 1.2MB] and April 2014 [PDF, 1MB] three reports reviewing the KC-46 tanker program. Interestingly enough the reports from 2012 and 2013 included such estimates of the over cost using Air Force data, the 2014 report did not. See 2012 and 2013 estimates below:

KC-46 EMD Estimates 2012.

KC-46 EMD Contract & Estimates (March 2012).

KC-46 EMD Contract & Estimates.

KC-46 EMD Contract & Estimates (February 2013).

Why did the GAO not include such estimate in 2014 report? Wasn’t the information available? The release of such estimates in 2012 and 2013 did not sit well in some spheres?

Today is March 21st 2015. I guess we shall see soon the annual report from the GAO with the specific view on the KC-46 program. I wonder whether such cost estimate will be included this time (hopefully yes). In any case, I guess the information from the Air Force estimate has been duly leaked.

The contract was awarded on February 24th 2011; about a year later USAF was already estimating that Boeing suffered already over 750m$ over costs from target price, 260m$ over ceiling price. For the Air Force the picture was bleaker. One year later the figures had increased again. Luckily for USAF the FPIF contract has a point of total assumption on the side of the contractor (Boeing), as I indicated in the post from 2013:

KC-46 EMD FPIF Contract.

KC-46 EMD FPIF Contract (March 2013).

Let’s see where we would be now in the previous curve taking the information from Bloomberg as good (“[…] the Air Force projected in a revised estimate this year that Boeing will have to absorb $1.5 billion for exceeding a $4.8 billion ceiling to develop the first four planes.”):

KC-46 EMD FPIF Contract - 2015

KC-46 EMD FPIF Contract (March 2015 update, based on Bloomberg)

As I mentioned in the blog post from 2 years ago: this is the typical FPIF contract curve, which is the only thing which is missing in ALL the news, budgeting materials, GAO reports, etc., that I have read and is the most illustrative graphic to understand what is going to happen if the cost overruns keep piling and who is going to bear which amount of the cost from which point.

Bloomberg and the US Air Force estimate that those 1.5bn$ over the ceiling price are going to be born by Boeing as the FPIF contract stipulates. However, I wanted to call here the attention to the FY2016 budget request from the USAF (DoD) [here, PDF, 8.5MB], see below:

See "Total Cost" and "Remark" (source: Exhibit R-3, RDT&E Project Cost Analysis: PB 2016 Air Force).

See “Total Cost” and “Remark” (source: Exhibit R-3, RDT&E Project Cost Analysis: PB 2016 Air Force).

As you can see the USAF budget request for the KC-46 program includes the remark:

The contract ceiling price of $4.9B is the government’s maximum financial liability on the prime contract. The “Total Cost” value represents the Milestone B Service Cost Position (SCP), which accounts for the ceiling price of the contract plus the financial risk of potential design changes for the KC-46 Aircraft. 

I would not discard that through the justification of “design changes” the American tax payer will have to bear part of those estimated 1.5bn$ over the ceiling price. We will see.

Finally, I think it interesing to see the planning included in the budget request from USAF (below), as it indicates a Tanker First Flight in the 3rd quarter of 2015 (not April 2015 as quoted by Bloomberg (“initial flight of the first fully equipped development aircraft”)).

USAF FY2016 budget request - KC-46 Planning.

USAF FY2016 budget request – KC-46 Planning.

You can compare it with the planning presented in February 2012 with FY2013 budget resquest:

USAF FY2013 budget request - KC-46 Planning.

USAF FY2013 budget request – KC-46 Planning.

The GAO talks about a “first flight of an aircraft that integrates military sub-systems has slipped at least three months to April 2015”, but in my view that doesn’t mean a “first fully equipped development aircraft”. In 2012 the planning had a tanker first flight at the beginning of Q2 2015 which in the 2015 plan it is shown in Q3 2015, thus the 3-month delay mentioned by the GAO.

I am indeed looking forward to the KC-46-specific report from the GAO that may be about to be published (1).

—

(1) I may then have to write another post with a new update.

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March 16, 2015 · 8:00 am

Boeing vs. Airbus: CEO compensation (2013)

Last Friday, while reading the Seattle Times article “Boeing CEO took home almost $29M last year” (referring to 2014) I was reminded of a recent conversation with some colleagues on the compensation of Boeing vs. Airbus Group CEOs.

As both companies are public companies, this information is public and can be found in the annual report and proxy statement from each one. I will just copy the information below for comparison and future reference. I use 2013 references to compare both at the same exercise, as 2014 annual report from Airbus Group is not yet available.

Airbus Group CEO, Tom Enders’ 2013 compensation (annual report here, PDF, 1.4MB)

Airbus Group's Tom Enders 2013 compensation.

Airbus Group’s Tom Enders 2013 compensation.

Boeing CEO, Jim McNerney’s 2013 compensation (proxy statement here, PDF, 1.1MB)

Boeing's Jim McNerney 2013 compensation.

Boeing’s Jim McNerney 2013 compensation.

Just as a complement, see in this article from The Washington Post “The pay gap between CEOs and workers is much worse than you realize“, based on a study by Harvard Business School, how the ratios of compensation between CEO and the average worker are in different countries, compared to what respondents to a poll said those ratios should ideally be.

 

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March 14, 2015 · 8:00 am

Blagnac half marathon 2015

Just two weeks after an illness forced me to quit in the Seville marathon, I had the chance to test myself in competition again at the half marathon of Blagnac. This was the 3rd time I ran the race, after I took part in the 2012 and 2014 editions. In neither of those I made an especially good time, always slower the in the Toulouse half marathon, even if I think Blagnac’s one is a bit flatter. In those previous two occasions the morning of the race had been very sunny and I felt too hot during the race (in 2014 it was a bit too windy as well). Therefore, this time, being another sunny morning, I decided to run with a cap in order to cover my head from the heat of the sun. As part of the training for Seville marathon I had run by myself alone a half marathon in 1h39’17”, my second best time in the distance, without any support in the form of supplies or other runners around. This made me confident that I could beat my personal best time in the distance, 1h37’29”, achieved in Toulouse in September 2013 (then in the preparation towards Athens marathon). I would have liked to run behind a pacer for 1h35′, but  there wasn’t. There were only pacers for 1h30′, 1h45′ and 2h. I decided to pace myself from the start aiming at 1h35′, that is a pace of 4’30” per km. I managed to keep that pace until about the kilometres 13-14. From then on I was more on 4’40-45″. But I still was making numbers in my head knowing that I would be able to beat my best time. I just needed to be below 5′ per km on average. Therefore, only the margin by how much would I beat it was in question.

Final sprint at Blagnac half marathon.

Final sprint at Blagnac half marathon.

In the end I managed a time of 1h35’48” (net time), that is effectively a new PB or PR (personal best or record), a reduction of 1’41” in comparison to my previous PR. You can see below in the comparison of both performances that this time I was reducing some seconds kilometre per kilometre. In the end a global pace of 4’32” vs the previous record of 4’38”:

Comparison of Blagnac 2015 and Toulouse 2013 half marathon performances.

Comparison of Blagnac 2015 and Toulouse 2013 half marathon performances.

In fact, I passed the 10 kilometre mark in about 44’20”, practically my second best time in the distance. If I had been running a 10k race, I am sure would have been below 44′, beating my personal best in that distance. See below the evolution of the pace, compared with my initial target (4’30”) and the final average pace (4’32”):

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Evolution of pace compared to initial target and average pace.

Another good thing of this race is that I get a good feeling after the bitter experience from Seville. 🙂

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March 12, 2015 · 8:00 am

Marathon Sevilla 2015

“A marathon always offers you the opportunity to do something epic”, Jaime Irastorza (my brother)

After several dozens of races completed in the last years, including 11 marathons and an ultra, on February 22, a race hunted me down. In the last Seville marathon I DNF. I did not finish.

I wrote a post which was published on the morning of the race. In it I explained that I arrived to that marathon in my best shape so far. However, for me the race took place not on the Sunday 22nd February but on Saturday 21st.

I had put much illusion into the event: running in Seville, the attempt at beating my personal best time, being accompanied by family and friends…

On Friday afternoon we went to the marathon expo at the FIBES. There we retrieved our running bibs, got the confirmation that we could start the race together, took our official expo picture and by chance I met elite runner Pablo Villalobos (1), with whom I had exchanged some tweets in the morning.

The 4 of us posing with the running bib in front of the circuit map.
With elite runner Pablo Villalobos.

That evening we had dinner out with friends in the downtown; plenty of different delicious tapas to share. We had some fun… though at the end of the dinner I started feeling weak, and I went back to the hotel instead of staying with the friends to take some drinks.

On Saturday morning I woke up with stomach problems and some diarrhea. I went to the pharmacy to get some pills and rested a few hours. I feared for the race the day after. The hours passed and I felt a little bit better so we went to have lunch with some 14 friends at Puerto Delicia.

Saturday's lunch with friends.

Saturday’s lunch with friends.

After lunch we went for a walk and I started to feel weak again. We went back to the hotel room. By about 18h, in the bed, I started shivering. During the following hour the fever went up and up. At 19h I reached out for the WC to vomit (such a pity of the previous meals!). I called my brother to ask if he could bring me some drinks and food to the room. By 20h he came with some Aquarius and bananas. 10 hours to recover before waking up time, 13 hours to the marathon start time. That was the start of my race during the night in order to take part of the event.

In the following hours I drank, ate and slept bit by bit, until 24h, when I finally put myself to get a long sleep (6 hours).

On Sunday morning at 6am I woke up on the clock alarm. I stood up and it seemed that I felt OK. With that check I went downstairs to have breakfast. I met there Jaime and Juan, who were happy and very surprised to see me there. After the breakfast we took a taxi and departed for the Stadium at La Cartuja, where we met Jose.

The day was sunny though a bit cold. Changing clothes, drinking a bit, seeing the thousands of runners going through the rituals before the race… that cheered me up.

Before the race.

Before the race.

At few minutes before 9am we went to our corral, 3h45’-4h. We chatted with other runners and with that we went off for a good run!

You can see here a good report of the marathon by my brother Jaime.

We went together for the first 13 kilometres. Our target was to run at a pace of 5 minutes per km. We alternated some at a somewhat higher pace with other at a slower pace. At km 7 we saw Luca and Andrea who greeted us from the hotel room.

Passing by the hotel at km 7.

Passing by the hotel at km 7.

By the 10km mark we were just losing some 40″ in relation to our 3h30’ target time.

Running at some point.

Running at some point.

After having drunk at a few supply posts I started feeling some pain in the stomach, like cramps. Something wasn’t working well. I told my brother and Jose to go ahead with their pace and forget about me. I wasn’t sure of the fate of my race. Ten minutes later, at km 15 I stopped at one of the WC cabins. I had to vomit everything I had taken. Not a good signal. I was emptying my reserves and not replenishing sugar nor minerals.

I re-started at a slower pace (~5:15) for some minutes and then decreased it later (~5’20”-5’30”). I passed the half marathon point in 1h52’01”, not a bad time. In theory that would point at a marathon time of around 3h50′. However, the feelings weren’t good.

At the km 22 I was feeling weaker and most important, I started to worry. After the last 24 hours, having vomited everything and not being able to ingest food and liquid, at some point I would run out of glucose. I feared that if I continued to run I would be risking fainting in any moment above around 2 hours. I pondered during some minutes whether to give it a try. “It doesn’t matter if you are well above 4 hours!” I had been there (in those times) before. I had completed other marathons in pain, injured. However, I thought this risk was more serious.

At about km 23 I had decided to quit. I would have other marathons to beat my best time. Other marathons to complete. Other marathon to run with Jaime end to end. But it would not be this one. I continued running softly, seeking out for a taxi. I found it at km 26.6… and then I stepped aside.

With that decision I put an end to my epic fight against the distance of that marathon that day. See the records of my Garmin watch below:

My Garmin data from Seville marathon.

My Garmin data from Seville marathon.

I regretted having quit not even a minute afterwards while seeing the runners along. I even saw Juan from the taxi… but thinking it over a few days later I think it was a good decision. In less than 2 months from that date and just 6 weeks from the date this post is published I will be running the Madrid marathon and there will hopefully be many other marathons to run.

The experience in Seville will teach me to appreciate even more the marathons completed, to value the good health enjoyed on race days so far, and to realize how difficult is to achieve and beat a personal best time… something you do not conquer the day after you have been sick. Nevertheless, I love the distance, the race, the marathon, and I had to give it a try. I tried some thing epic but it could not be.

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(1) He had placed 2nd and 4th in previous editions of the race. You can check out his blog here. By the way, for Pablo it wasn’t also the best day: he quit in km 26 too, his first marathon not completed, too.

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March 10, 2015 · 8:00 am

The most (and least) read of the first 500 posts

A classic post of the blog: a recap at each hundredth post dedicated to show which were the most and least read of the first 500 posts. (1)

Since I started the blog in February 2010, the blog has received over 207,000 visits and hundreds of comments.

Find below the list of the top 10 and bottom 10 posts:

1. Impuestos en Francia vs. España
2. Will Boeing 787 ever break-even?
3. Mi adiós a Ibercaja
4. 787 Break Even for Dummies
5. Monaco GP Walking Tour
6. Impuestos en Francia vs. España (actualización 2012)
7. Airbus vs. Boeing, comparison of market forecasts (2012)
8. Beluga vs. Dreamlifter
9. Patek Philippe Caliber 89
10. Airbus vs. Boeing, comparison of market forecasts (2011)
…

490. Resist the bias to act
491. Bill Clinton endorsing Kiva (video)
492. Risk
493. Europe Day
494. Nothing like a good red wine…
495. What charities do you support?
496. Bye, Vistalegre
497. Boulevards de Colomiers 2014
498. Special assistance vs. free ride
499. Wells Fargo History Museum at San Francisco

Let’s see what I’ll write in the next 100 posts…

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(1) I wrote four such posts when I reached the first 100, 200, 300 and 400 posts in the blog.

NOTE: the box in the right showing “Current Top Posts” shows the most read ones in the last two days, not the all-time most read ones (the ones above).

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March 8, 2015 · 8:00 am

International Women’s Day, Global Gender Gap and backing women dreams

Today, March 8th it’s International Women’s Day. In the last few days I have seen a significant buzz in social media about the day. In particular I read a couple of pieces that made contribute to the buzz with this post.

World Economic Forum:

Equal pay benefits men, too. Here are four reasons why, backed up by our Global Gender Gap Report. [PDF, 6.1MB]

I liked the approach: “What’s in it for me?” (from the perspective of men, of course) (1).

Take a look at the report (395 pages). I skimmed through it and picked some essentials, especially from a couple of graphics. The Global Gender Gap Index measures gaps in 4 sub-indices: Economic Participation and Opportunity, Educational Attainment, Health and Survival and Political Empowerment. The sources for the data are the International Labour Organisation, World Economic Forum, UNESCO Institute for Statistics, Central Intelligence Agency, World Health Organisation and the Inter-Parliamentary Union. The authors (Ricardo Hausmann (Harvard University), Laura Tyson (Berkeley), Yasmina Bekhouche (World Economic Forum) and Saadia Zahidi (World Economic Forum)) explain their methodology as follows:

There are three basic concepts underlying the Global Gender Gap Index, forming the basis of the choice of indicators, how the data is treated and the scale used. First, it focuses on measuring gaps rather than levels. Second, it captures gaps in outcome variables rather than gaps in input variables. Third, it ranks countries according to gender equality rather than women’s empowerment.

I attach below a screenshot showing the top 30 countries in the list.

Global Gender Gap Index, 2014 ranking, top 30 countries.

Global Gender Gap Index, 2014 ranking, top 30 countries.

Some comments to it:

  • Scandinavian countries are in the top of the list (no surprise here).
  • Some readers will wonder about the top places occupied by Nicaragua, Rwanda… read again the methodology above: “it focuses on measuring gaps rather than levels”.
  • When I see this kind of indices, for personal reasons I focus on the positions occupied by: Denmark #5, Germany #12, Netherlands #14, France #16, Spain #29, Lithuania #44.
  • A curiosity: Spain #29 vs. Cuba #30.
  • No surprises either at the bottom of the list: Bahrain, Turkey, Algeria, Ethiopia, Oman, Egypt, Saudi Arabia, Mauritania, Guinea, Morocco, Jordan, Lebanon, Ivory Coast, Iran, Mali, Syria, Chad, Pakistan, Yemen… which they all have in common that are located in arid subtropical zone and that most of them have at least one letter a in the name.

Coming back to the question: “What’s in it for me?” The report shows how countries in which the gender gap is lower also have good scores in several other metrics which improve the conditions of life for men as well. There is the catch. See below the comparison for the Human Development Index and the Global Competitiveness Index:

Human Development Index vs. Global Gender Gap Index.

Human Development Index vs. Global Gender Gap Index.

Global Competitive Index vs. Global Gender Gap Index.

Global Competitiveness Index vs. Global Gender Gap Index.

What can you do to help to close the gender gap? In your community you can do much. See this other open letter also in World Economic Forum from Belinda Parmar, “To men, for International Women’s Day“:

We need you.

We need you to listen. When we tell you about a problem, we don’t want you to jump to a solution for us. We just want to say it out loud to solve it ourselves knowing that you will support us.

We need you to talk. To raise the issue of gender. Don’t worry about saying the wrong thing. Saying the wrong thing is better than saying nothing at all. It’s the only way to start the conversation.

We need you to value our differences. Realise that we bring a different perspective and encourage us to bring our personalities to work, to not feel like we have to put on a ‘male suit.’

…

One step further: what can you do to help to close the gender gap in the countries at the bottom of the list? (those with the letter a in the names)

A few days ago I received an email from Jason Riggs of Kiva, the world’s first and largest crowdfunding platform dedicated to alleviating poverty and expanding financial inclusion (about which I have written before in this blog (2)). Kiva has launched Kiva.org/Dreams to empower even more women to reach for their dreams and they asked me to help them in making this campaign more widespread. Thus, here is my contribution:

By visiting Kiva.org/Dreams, you can back a dream by choosing a woman whom Kiva should lend $25 to. There is no cost to you. By choosing her, you help her to follow her dream of starting or growing her business, sending her children to school, and ultimately, gaining financial independence.

When women have the resources to make their dreams a reality, the world changes. More children go to school, more food is grown, and nations are more peaceful and prosperous. A case in point: if women farmers had equal access to farming assets and finance, they could increase their crop yields up to 30% and 150 million people who go hungry every day would be able to eat.

By contributing to the success of an entrepreneurial woman who has overcome obstacles, we discover so much more about our own resiliency, possibility, and potential. Each of us has a part to play.

 Together we can make dreams a reality for thousands of women around the world. So in honor of International Women’s Day and the power of women, back a dream at Kiva.org/Dreams.

My suggestion: visit the site of Kiva, filter by Yemen, the country at the very bottom of the list and help dreams come true, gender gaps close and turning around the situation.

Happy International Women’s Day!

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(1) I like the approach for its different persuasion approach, not like the closing the gap out of equal treatment, fairness, justice… wasn’t engouh.

(2) See other posts about Kiva: “My 100th loan with Kiva“, “A Kiva success story“…

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March 6, 2015 · 8:00 am

Turboprop market vs. oil price (ATR figures 2014 update)

Few weeks ago, the Toulouse-based aircraft manufacturer ATR (Avions de Transport Régional) published a press release reporting some of its numbers for the year 2014 (being a private company, owned by Airbus and Alenia, it does not publish a complete financial annual report). Some of the key figures were:

  • Revenues increased 10% to 1.8bn$.
  • A new record of 83 deliveries (+12%).
  • A new record of sales with 160 firm aircraft orders (plus 120 options). (1)
  • A record backlog at year-end with 280 firm aircraft in the order book.

About 4 years ago, I wrote a post, “Turboprops market different dynamic“, in which I discussed:

[…] how civil turboprop market is unrelated to the larger and more known turbofan civil aircraft market and how its dynamics are completely unrelated to World GDP growth and thus world air traffic growth. […]

When calculating correlation between the different variables, I discovered that the correlation between GDP and deliveries is rather low, despite of the time lag applied (be it 2, 3, 4 years…). However I found that the oil prices and deliveries did correlate very well with a lag of 5-6 years, yielding coefficients of 0.55-.65, which are rather high.

I wanted to update the calculations I made then and last year, with the information of the 2014 exercise.

ATR deliveries vs. GDP growth and oil price (2014 update).

ATR deliveries vs. GDP growth and oil price (2014 update).

With the last years’ data, correlations are similar:

  • Between oil prices and deliveries: high, above 0.54 from 1 year time lag, increasing through 6 years time lag (when it reaches a maximum of 0.82).
  • Between GDP growth and deliveries: low, not more than 0.34, and negative correlations up from 1 to 5 years time lag.

If there was causality, we could infer that the from the moment that oil prices are computed, till they are taken into regional airlines’ models, the fleet planners identify the need for new turboprops, the case is approved by airlines’ management, discussions start with ATR, negotiations are closed between the airline and the manufacturer, the aircraft are built and delivered to the airline… it takes about 6 years. (2)

This year the prices of oil have abruptly decreased in the last quarter:

Oil prices drop Q4 2014.

Oil prices drop Q4 2014.

However, this large drop is not yet fully noticed in the comparison made before as the historical database I use (here) only reflects prices up to the end of November and thus the 2014 average is still 89$ vs. 92.4$ in 2013. Even so, taking into account the figures from December (~55$) the year average will drop only to about 86$, not changing much the result.

It would be interesting though to see if oil prices stay low (50-60$) for the full 2015 year. If so, we could check whether the correlation stands and ATR starts to notice it in the form of lower orders (more cancellations?) and this is translated into lower amount of deliveries in about 3 years time (2018?).

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(1) Some 18 cancellations that took place in 2014 go untold in the press release, though they are easily deduced from the information of orders, and backlog from 2014 and 2013.

(2) About 3 of those 6 years are consumed from placing the firm order to getting the aircraft delivered, as we can see by the current figures of backlog (280 a/c) and yearly deliveries (83 a/c).

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